Cryptocurrency mining is causing power shutdowns in Kazakhstan, and China may be to blame

• Cryptocurrency miners in Kazakhstan have been causing power shutdowns and blackouts.
• The sudden increase in crypto mining is reportedly due to mining firms from China flocking to the country after the ban earlier this year.
• Kazakhstan now plans to charge registered miners in the country and ration electricity to meet the demands.

Cryptocurrency mining is reportedly causing an electricity crisis in Kazakhstan. With an increase in demand for electricity by cryptocurrency miners, there have been power shortages and even shutdowns at three power plants in October, according to a report by the Financial Times.

The electricity demand in the country has increased by eight percent so far this year as compared to the usual one or two percent. There have also been electricity blackouts in six regions in Kazakhstan next month. To help curb this, KEGOC, the country’s electric grid operator plans to start rationing electricity to 50 registered miners. This is also to deal with unregistered crypto miners illegally mining the digital currency from factories and their homes.

The reason behind the sudden boom in cryptocurrency mining in Kazakhstan is said to be due to the crypto ban in China earlier this year. Crypto mining firms were already flocking to Kazakhstan due to the low electricity costs but the demand jumped once the ban was imposed. The Financial Times estimates around 87,849 mining rigs have moved from China to Kazakhstan.

Crypto mining is a power-intensive process

Cryptocurrency mining consumes heavy power as the process of creating a new digital coin requires using large and powerful computers to solve complex cryptographic puzzles. Since cryptocurrency runs on a decentralised network with no governing body over it, each transaction is verified through mining. According to data from the University of Cambridge Bitcoin Electricity Consumption Index, bitcoin which is the most popular cryptocurrency consumes about 80 terawatt-hours of electricity annually.

The Kazakhstan government is trying to make this work by charging registered miners a compensation fee of 1 tenge (about $0.0023) per kWh from 2022 onwards. It is also asking a Russian energy company, Inter RAO, to contribute to the country’s national power grid. The country’s electric grid operator will also start rationing electricity to 50 registered miners. Kazakhstan is also looking at using nuclear power to help meet the electricity demands due to crypto mining. Kazakhstan’s President, Kassym-Jomart Tokayev, in a meeting on November 19 said that a nuclear plant could help with the burden on the country's electricity grids.

In addition to charging crypto miners, this is also said to help fish out illegal miners in the country. Kazakhstan isn't the only country struggling with illegal cryptocurrency mining. Iran also faces the same problem where it has 50 Bitcoin registered mining plants but 85% of the total mining operations in the country are reportedly illegal.

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